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House prices climb to record; pace of rise cools

Canadian home prices rose in July from June to hit a record high for a third consecutive month, but the slower pace of gains and falling prices in Vancouver added to recent evidence the market is cooling.

The Teranet-National Bank Composite House Price Index released on Wednesday showed overall prices climbed 0.7 percent in July from a month earlier.

The index, which measures price changes for repeat sales of single-family homes, was up 4.8 percent from a year earlier. It was the eighth consecutive month the annual price gain decelerated.

"Since prices rose 1.0 percent from July to August last year, further deceleration is possible in August 2012," Teranet noted in the report.

The 0.7-percent monthly gain in July was the fifth rise in a row and was led by a 2.0-percent rise in prices in Hamilton, Quebec City and Victoria and a 1.6-percent increase in Toronto. Vancouver prices dropped 0.5 percent -- the first decline there in five months.

A long run-up in Canadian house prices and low supply in some markets has sparked concern that a housing bubble is forming. The federal government has tightened mortgage lending rules four times in four years to try to prevent borrowers from taking on too much debt to buy into the market.

Six other markets lagged the national monthly increase. Prices rose 0.6 percent in Ottawa-Gatineau, 0.4 percent in Edmonton and Montreal, 0.3 percent in Winnipeg, 0.2 percent in Calgary and 0.1 percent in Halifax.

Halifax has had the longest run of monthly increases, with nine, followed closely by Toronto and Montreal with eight months each of rising prices.

Year-over-year data showed prices were up 9.2 percent in Toronto from July 2011 but just 1.6-percent higher in Vancouver, a deceleration that suggests the long boom in housing there may be coming to an end.